231. A corporation issues $500,000, 8%, 5-year bonds on January 1, 2015 for $479,000. Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight- line method of amortization of bond discount, the amount of bond interest expense to be recognized on July 1, 2015 is

Question

Quizplus · Accepted Answer

The annual interest payment is $500,000 x 8% = $40,000.
The semi-annual interest payment is $20,000.
The bond discount is $500,000 - $479,000 = $21,000.
The amortization of bond discount per period is $21,000 / 10 = $2,100.
Therefore, the bond interest expense to be recognized on July 1, 2015 is $20,000 + $2,100 = $22,100. 
Thus, the correct answer is (C).